HESTA dumps Transfield citing detention centre abuses

Evidence that sexual assaults, child abuse, and other human rights violations inside the Australian government's offshore asylum seeker processing and detention centres are being covered up has led one of the country's biggest superannuation funds to dump contractor Transfield Services.

Industry super fund HESTA has sold its stake in Transfield Services citing evidence of human rights violations inside the offshore detention centres run by the sharemarket-listed company.

The $32 billion fund said the risks associated with Transfield Services, the $597 million company that operates the federal government's detention centres on Manus Island and Nauru, were too high.

"A substantial body of evidence is available pointing to the negative impacts of prolonged mandatory detention of asylum seekers, both the United Nations and the Australian Human Rights Commission are among respected authorities that have said it is a breach of human rights laws," HESTA chief executive Debby Blakey said.

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HESTA CEO Debby Blakey.

"There is also a significant quantum of evidence that there have been numerous sexual and physical assaults in the detention centres operated by Transfield Services."

After more than a year of engaging behind the scenes as an activist investor, HESTA finally took the step of instructing the three external fund managers who held shares in the company on its behalf to sell the lot on Friday. The super fund previously owned a 3 per cent stake, valued in excess of $18 million.

"We believe it is highly likely that the social governance issues associated with its detention centre contracts will have a negative impact on Transfield's business and share price, so have concluded it was in the best financial interests of our members to divest the stake," Ms Blakey said.

She flagged the heightened risk of future legal actions against the company.

Lack of transparency

"Strict confidentiality clauses in Transfield's government contracts meant the company was unable to answer questions we needed answers to," Ms Blakey said.

Many discussion were held with Transfield's board and management before taking action to exit the investment, including inviting the company to send representatives to front its board for an hour long discussion in May. Neither Transfield chair Diane Smith-Gander or chief executive Graeme Hunt attended any of the meetings, sending other directors and executives in their place.

In a written statement provided to Fairfax Media by Transfield Services on Tuesday the company said: "Our shares are traded every day. We understand one investor has recently divested its interest, while at least one other has increased its interest. Shareholders including major funds continue to support the company".

The engineering company's stock was fetching $1.15 at Tuesday's market close, well down from their all-time high of $10.51 at the peak of the mining construction boom in 2007. The shares have risen 45 per cent since Transfield was awarded a $1.2 billion contract to run the facilities Manus Island and Nauru in February 2014. Most financial analysts hold a positive view that the area offers a good growth opportunity for the company.

Analysts estimate that the detention centre contracts contribute between 15 per cent and 20 per cent of Transfield's total revenue.

The Australian Council of Superannuation Investors has an ongoing engagement with Transfield Services in relation to the social governance risks associated with is detention centre contracts, meaning that more super funds could be readying to follow HESTA's lead.

HESTA is the country's sixth largest largest superannuation manager, responsible for investing $32 billion in retirement savings on behalf of more than 800,000 Australians. The majority of its members are women working in the healthcare and community services sectors.

Many doctors, nurses, and other workers in the sector have protested the Border Force Act, which came in to effect on 1 July. The Act makes it illegal for healthcare professionals to report child sexual abuse in offshore detention centres.

Some of HESTA's members have used direct contact and social media to lobby the fund to blacklist Transfield Services, but Ms Blakey said the internal review process had already begun many months earlier.